Canada’s bid to protect its democracy by corralling informal funding groups could have unintended outcomes counter to its aims. James Patriquin and Caroline Shenaz Hossein explain.

Between 28 January and 18 February, 2022, Canada’s capital, Ottawa, was beset by a populist political uprising. At first the protest appeared to be organised by mostly blue-collar truckers. But it was quickly revealed as being led by organisers with an ambitious and subversive goal. Far from seeking a change in policy, the convoy uprising sought to “non-violently” replace Canada’s Liberal government led by Prime Minister Justin Trudeau – despite him being elected to lead a minority government only five months prior.

A fringe right-wing organisation called Canada Unity emerged as a lynchpin in the convoy organisation. It helped lead communication and fundraising efforts. It was also the group behind an infamous memorandum calling for Canada’s Governor General to recognise a new, wholly unelected provisional government. For two weeks, the Canadian capital was occupied by some 8,000 rioters trying to pressure the government to either change course or stand down. Their behaviour ranged from horn honking and tailgate parties, to residential street blockades, harassing locals, and forcing business closures

Rioters even set up blockades at some of the most important border crossings between Canada and the US. That included a six-day blockade of the Ambassador Bridge between Windsor and Detroit, which is perhaps the most important land artery supporting Canada-US trade. It is easy to read the Emergency Act’s deployment as a direct response to these border blockades. The Windsor blockade lasted between February 9th and 15th.

By invoking the Act on February 14th, the Trudeau government signaled its intent not only to end the uprising using federal police, but also to go after the financial channels that propelled the uprising to a national spotlight. There is now a law in place that extends Canada’s financial compliance system over informal money services, such as crowdfunding and cryptocurrency platforms. These new services operating in Canada must report directly to the country’s federal regulator and compliance mechanism, Fintrac.

Under the act’s provisional authority, Canada’s government also gave banks the discretionary power to freeze more than 200 accounts containing nearly $8 million in cash.

Under the act’s provisional authority, Canada’s government also gave banks the discretionary power to freeze more than 200 accounts containing nearly $8 million in cash. Canadian crypto platforms were even ordered to prevent the flow of funds to known Bitcoin addresses run by convoy organisers. It remains unclear why this extraordinary intervention was deemed to be necessary.

Elites and financial governance

The new reporting requirements suggest social financial organisations such as crowdfunding and savings collectives, may at some point be expected to report to Fintrac as well. This is unfortunate since many indigenous Canadians, ethnic minorities, and immigrants use informal services – examples include susus, hagbads, and hawala networks – due to their own financial alienation at the hands of Fintrac and, by extension, Canadian banks. It seems in Canada the trend is to ignore changing financial realities and instead subrogate the enforcement of financial laws to a wider range of corporate intermediaries. This implies an effort to preserve the close relationship between the Canadian state and financial elites from Canada’s five big banks. It is, at its core, a centralised and nationalist system ironically being extended under emergency measures and in the name of protecting Canadian democracy from foreign influence. 

In reality, a majority of the donations to the convoy uprising came from Canadians.

In reality, a majority of the donations to the convoy uprising came from Canadians. Roughly 52% of GiveSendGo donations and 86.5% of GoFundMe donations collected on the convoy’s behalf were contributed specifically by Canadians living in Canada. A total of $14.5 million was collected from Canadians through these two platforms and as much as $4.6 million came from Americans. Not only did Canada’s government suspend due process based on these crowdfunding figures – it also made sweeping and permanent changes to Canada’s money laundering and terrorist financing laws. 

These changes by the Trudeau government assume future protests will rely on the same organising strategies which have proven to be unreliable. The connection drawn between informal finance and criminal activity tacitly admonishes those who use informal services or platforms. This tactic also portrays other forms of finance as illegitimate when compared to Canada’s centralised system.  

Portraying informal finance in this way suggests it is a deviant or criminal space unconnected from Canadian banks, but this is a convenient myth. Where informal financial services interact with banks, they are already subject to Fintrac. Thus, by stereotyping the informal as shadowy and subversive, Canada’s government is working to stabilise our perception of a nationalist financial system within an integrated global economy. This action reflects the government’s significant interest and investment in maintaining that system. 

Finance, politics, and trust

Elite-driven finance constructs the absence of privacy and our dependence on inefficient intermediaries as the norm. Elite-centered practices treat the desire for privacy and efficiency as suspicious or illegitimate. Such practices rest upon a class alliance which aids government by deflecting calls for financial reform, and specifically ignoring the outsized issues or unequal access, tax evasion, money laundering, and discrimination which formal finance upholds. 

In a period where trust in public institutions has cratered following a pandemic, and where digital currencies have made even closed capital accounts look porous, the Trudeau government is deploying an outmoded regulatory formula. Canadians are being asked to trust a cadre of financial elites to observe their transactions in a fair and non-discriminatory manner, despite many recorded instances of mistreatment and exclusion by our big banks. Canadians are asked to trust political elites to judge anti government protests in a just and impartial manner. Canadians are told they will be better off when informal financial services are made to be more like their financial industries and scrutinised to the same extent. Government claims it is protecting democracy rather than its own financial interests. Government expects us to trust what we cannot verify for ourselves.

Canada’s renewed commitment to financial surveillance paradoxically illustrates the growing usefulness of informal payment channels. This includes crowdfunders as well as digital currencies.

Canada’s renewed commitment to financial surveillance paradoxically illustrates the growing usefulness of informal payment channels. This includes crowdfunders as well as digital currencies. Digital transactions do not rely on intermediaries and are becoming increasingly opaque. The extension of Fintrac regulates intermediaries but fails to effectively scrutinise peer-to-peer payments. This extension will also likely create demand for informal finance. It all but ensures the next time a political movement seeks to fundraise against a government policy, it will be out of official view.

Finance is not good or bad. Finance is a tool, and its impact depends on who is using it and why. Informal finance contributes to financial crime, but it also works to make money services more accessible, fair, and reliable. Informal finance has been essential for the development of cooperative financial governance, efficient remittance payments, and with an eye to correcting the government’s dependence on elites for compliance enforcement. Finance can be used to promote good governance as well as to limit it – and our laws would be better for recognising this dualism. 

But Canada’s regulatory changes instead put future governments at a disadvantage. These changes will drive bad actors beyond the government’s legal authority and burden good actors who stay within it. Financial regulators are squeezing a fistful of sand. The harder they squeeze, the tighter they pack the middle mass of grains, and the more they lose the fringes between their fingers. 

James Patriquin

James is a PhD candidate in Political Science and Political Economy at Carleton University. He studies the political economy of digital currencies and decentralized finance.

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Caroline Shenaz Hossein

Caroline is Associate Professor of Global Development and Political Science at University of Toronto-Scarborough and founder of the Diverse Solidarities Economies Collective. Follow her on Twitter @carolinehossein.

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